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Millions of people in the eastern United States awoke yesterday to flooded homes, fallen trees and power cuts caused by the giant storm Sandy, which swamped New York's subway system and submerged streets in Manhattan's financial district.

At least 40 people were reported killed in the US by Sandy, one of the biggest storms to ever hit the country, including 17 in New York City.

The storm made landfall in New Jersey on Monday night with 130km/h sustained winds and cut power to more than 8.1 million homes and businesses from the Carolinas to Ohio. President Barack Obama declared a major disaster in New York and Long Island, making federal funding available to residents of the area.

New Jersey Governor Chris Christie described a bleak picture: Seaside rail lines washed away. No safe place on the state's barrier islands for him to land. Parts of the coast still under water. "It is beyond anything I thought I'd ever see," he said. "It is a devastating sight right now."

New York's three major airports remained closed. More than 15,000 flights had been cancelled for Monday and yesterday, according to the flight-tracking service FlightAware.

Cathay Pacific had cancelled six New York flights by yesterday. The airline said another flight, via Vancouver, would only go as far as the Canadian city.

More than 1 million people in a dozen states were under orders to evacuate as the massive system ploughed westwards.

One disaster forecasting company predicted economic losses could ultimately reach US$20 billion, only half of that insured.

"This will be one for the record books," said John Miksad, senior vice-president for electric operations at Consolidated Edison, which had more than 670,000 customers without power in and around New York City.

Trading at the New York Stock Exchange was cancelled again - the first time the exchange suspended operations for two consecutive days due to weather since a blizzard in 1888 - but the major exchanges were expected to reopen today.

Sandy brought a record storm surge of almost 4.2 metres to downtown Manhattan, well above the previous record of three metres during Hurricane Donna in 1960, the National Weather Service said.

"This was a devastating storm, maybe the worst we've ever experienced," New York City Mayor Michael Bloomberg said.